Job Bytes

Unemployment Rate Edges Down to 7.7 Percent as Job Growth Slows

The unemployment rate fell to 7.7 percent in November, its lowest level since December of 2008. However, the immediate cause was a drop of 350,000 in the size of the labor market as reported employment actually fell by 122,000. The establishment survey reported job growth of 146,000. With the prior two months growth revised downward by 49,000, this brings the average over the last three months to 139,000. This is somewhat worse than the 158,000 average rate of job growth over the last year.

The private sector accounted for almost all the November job growth, adding 147,000 jobs. Average growth over the last three months has been 153,000. All the loss in public sector employment over this period was attributable to decline in employment of 50,000 in local government education. Without the loss of jobs in this sector, government employment would have been essentially flat over the last year.

Retail was the biggest job gainer in November, which added 53,000 in November, 33,000 of which were in clothing. After showing little change for the prior three years, the retail sector has added 140,000 jobs over the last three months, with clothing being responsible for almost half (68,000) of these jobs. Some of these gains are almost certainly the result of changing seasonal patterns with retailers pulling forward holiday hiring. That suggests weaker growth going forward.

Construction employment fell by 20,000, more than reversing a 15,000 gain reported in October. Employment in the sector has been essentially flat over the last year. Manufacturing lost 7,000 jobs. Employment in the sector has been essentially flat since June after rising by 26,000 a month over the prior seven months. Temporary employment rose by 18,000 and health care added 20,000 jobs, slightly less than its average of 26,000 over the last year.

One anomaly was a jump of 14,600 jobs (4.0 percent) in the motion picture industry. This will be reversed in future months.

Women got somewhat more than half the gains (91,000 jobs) over the last month. This reverses the pattern for the last couple of years in which men were coming out ahead. The better job growth for men was not due to the comeback of traditional areas of male employment, such as construction and manufacturing, but rather by men getting a disproportionate share of the jobs created in areas such as retail and health care.

The household data indicated little change from prior months. While the drop in unemployment is good news, the employment rate actually slipped down to 58.7 percent, just 0.5 percentage points above the 58.2 percent low last reached in the summer of 2011.

There were not many unusual patterns among various demographic groups. The over-55 group continued to do relatively well, with employment rising by 177,000 in spite of the overall decline. One seeming anomaly is a sharp rise in the number of foreign-born women who report being out of the labor force. After dropping slightly from November of 2008 to November of 2010, this number has risen by 858,000, or 10.8 percent, over the last two years. The number of foreign-born men out of the labor force rose by 12.9 percent over the last two years; although the absolute size of the increase was just 462,000.

There was a jump of 163,000 in the number of self-employed, bringing it the highest level since February of 2010. The duration measures of unemployment showed an October jump being largely reversed.

On the whole, the data in the November report show pretty much the same picture as what we have been seeing over the last six months. The economy is creating jobs at a rate that is a bit faster than what is needed to keep pace with the growth of the labor market. At the current pace, we would not see the economy returning to full employment for another decade. Furthermore, there are more downside risks than upside -- for example, if there were to be severe deficit reduction as a result of the current negotiations between President Obama and Congress.